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Recent evidence indicates that the intensity of economic exchange within and across borders is significantly different: linkages are much tighter within, than among, nation-states. These findings, however, do not necessarily imply that borders and separate national currencies represent significant barriers to trade that should be removed, since the evidence is also consistent with the alternative hypothesis, that domestic exchange is more efficient because domestic producers are better able to satisfy the requirements of local consumers, owing to common tastes and institutions and the existence of local information and social networks. Focusing primarily on trade linkages within and between Canada and the United States, the authors review the evidence on the extent to which national borders lessen the intensity of international economic linkages, primarily trade in goods and services, and the effects on domestic welfare. They also examine the evidence on the impact of common currencies on trade and welfare. They determine that, since the empirical models employed to date in this research cannot distinguish between alternative explanations of the evidence, it is not yet possible to draw firm conclusions for policy-making.

Economic growth in Canada is expected to average 2.1 per cent in 2015 and 2.4 per cent in 2016, with a return to full capacity around the end of 2016.

How much of a CBDC would Canadian households want to hold, and what design features of a CBDC would they care about?

This is the second in a series of semi-annual reports designed to increase the transparency and understanding of Canadian monetary policy.

We examine the relationship between firms’ performance and credit constraints affecting export market entry. Using administrative Canadian firm-level data, our findings show that new exporters (a) increase their productivity, (b) raise their leverage ratio and (c) increase investment. We estimate that 48 percent of Canadian manufacturers face binding credit constraints when deciding whether to enter export markets.

At the time of last November’s Monetary Policy Report, two issues dominated the analysis: the global economic slowdown and the fallout from the September terrorist attacks.

Over the last six months, most countries have continued to register strong economic growth.

Canada’s economy faces two significant shocks—the plunge in global oil prices and the impact of the COVID-19 pandemic.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

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Ready References

The book is part of the National Currency Collection, Bank of Canada.
Photography by Gord Carter, Ottawa.